Making Medicare: The Politics of Universal Health Care in Australia

by Anne-marie Boxall, James Gillespie

Overview

Since the 1980s, Australians have had a system of universal health care that is often taken for granted. But the road there wasn't easy. Making Medicare is a comprehensive account of Australia's long, tortuous, and unconventional path toward universal health care—as it was established, abolished, and introduced again—and of the reforms that brought it into being. With its detailed investigation of the policy debates that have determined the shape of health care in Australia, this book is the most thorough survey of Medicare's history published to date. But it is not just about the past. The authors offer a timely overview of further reforms needed to address the challenges facing our health care system: new technologies, the aging population, and the rising tide of chronic disease.

Product Details

ISBN-13:	9781742241432
Publisher:	UNSW Press
Publication date:	10/01/2013
Sold by:	Barnes & Noble
Format:	eBook
Pages:	240
File size:	1 MB

About the Author

Anne-marie Boxall is the director of the Deeble Institute for Health Policy Research, an initiative of the Australian Healthcare and Hospitals Association. She has worked for the National Health and Hospitals Reform Commission, the Commonwealth Treasury, and the Commonwealth Parliamentary Library. James Gillespie is the deputy director of the Menzies Centre for Health Policy at the University of Sydney. He has been researching and writing on the politics of health in Australia and internationally for two decades and is the author of The Price of Health: Australian Governments and Medical Politics 1910–1960.

Read an Excerpt

Making Medicare

The Politics of Universal Health Care In Australia

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By Anne-marie Boxall, James A. Gillespie

University of New South Wales Press Ltd

Copyright © 2013 Anne-marie Boxall and James A. Gillespie
All rights reserved.
ISBN: 978-1-74224-657-4

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CHAPTER 1

HEALTH REFORM EFFORTS TO THE 1950s

On 15 March 1939, Robert Menzies dramatically resigned as Attorney General in Joseph Lyons' United Australia Party (UAP) government. Menzies' revolt came about because cabinet over-ruled him and abandoned plans to implement a national insurance scheme. The scheme would have provided most Australian wage earners with access to medical benefits for the first time. In a public attack on Lyons, Menzies criticised the decision as one that 'cripples or destroys National Insurance for years to come'.

Australia had a limited set of national welfare measures in the first decades of federation. The aged and invalid pensions were established in the Constitution and had been supplemented by a maternity benefit and some limited state-based programs. These benefit programs were funded from general revenue, and most were heavily means-tested. However, those ineligible for pensions, most of the destitute, the unemployed and the seriously ill, were left dependent on charity, or the limited benefits offered by friendly societies, mutual benefit organisations that dated from the early days of settlement.

The argument for a more thoroughgoing system of national insurance went back at least to 1911. A Royal Commission into National Insurance, established by the conservative Bruce government in 1924, reported in favour of the idea just as the financial crash of 1929 destroyed all thoughts of financial experimentation. However, even in the depths of the Great Depression, the federal government faced dire warnings that it was going to be impossible to sustain old age and invalid pensions without major fiscal reforms. A series of demographic projections by Charles Cerruty, the Commonwealth Auditor General, predicted that the low birth and immigration rates of the 1930s would result in a dangerous shrinking of Australia's working (and taxpaying) population. By the 1960s, the proportion of the population in the workforce would be so low that their tax payments would no longer cover the growing costs of pensions.

Cerruty's warnings added a new urgency to the long-standing argument that pensions should be changed so that they operated on a contributory, insurance basis. European models of national insurance relied on compulsory deductions from workers' paypackets, with matching contributions from their employers as well as the government. Benefits were based on an individual's past record of contributions.

Richard Casey, Treasurer in the Lyons government, echoed Cerruty's alarmism with a series of pamphlets warning of Australia's 'Vital Drift', the social and economic impact of a falling birth rate and ageing population. Casey pointed to the growing cost this imposed on Australia's old age pension system, 'the most generous and humane of any country in the world'. New ways must be found to fund this growing fiscal burden – but not at the price of cutting these entitlements: 'We can be proud of the heightening sense of social responsibility of which it is a fine expression'. The answer to the pension problem for Casey and other progressive leaders of the UAP lay in a shift towards contributory pensions, opening up the possibility of a broader set of insurance-based benefits, including unemployment and medical services.

The contributory principle was attractive to progressive liberals such as Casey, with its stress on individual self-reliance and fiscal rectitude. National insurance was a central plank in Lyons' victorious platform in the federal election of October 1937. He promised 'a scheme under which, for moderate weekly contributions, there would be available, for the great majority of the employed population, guaranteed benefits during sickness, medical treatment at all times, pensions for widows and orphans, and superannuation'. After the election, Casey and Sir Frederick Stewart, a fellow cabinet minister, took carriage of a national insurance scheme. They relied heavily on the British model of national health insurance, even borrowing Sir Walter Kinnear, a senior civil servant from the British Ministry of Health, to design the program. The Lyons government introduced the national insurance scheme into Parliament in 1938, having abandoned most of the non-medical coverage, including unemployment, along the way. It was a contributory scheme, including medical benefits, and was to be administered by 'approved societies', which would include the old friendly societies as well as new organisations, including some established by trade unions.

The new scheme faced furious opposition, ranging from the Australian branches of the British Medical Association (which warned that it heralded the socialisation of medicine in Australia) through to militant trade unions and the Communist Party (which thought its contributory basis regressive and radically unsocialist). Ultimately, though, it was the hostility of sections of the Country Party, despite being in coalition with Lyons' United Australia Party, that proved the final nail in the coffin for the national insurance scheme; rural MPs argued that the scheme would give too much power to the pastorally based Australian Workers Union, the graziers' sworn enemies. Where the BMA and the militant unions had failed, Lyons' parliamentary colleagues succeeded in stopping the introduction of national insurance. Although the legislation was passed by Parliament, Lyons announced that the national insurance scheme would be postponed and promised instead a vaguely described family health scheme.

Menzies, the dominant conservative figure of the post Second World War era, seems an unlikely hero of national health policy. However, his dramatic resignation from government over the issue of national insurance showed that he understood that access to medical care had become – and would remain – a central issue in Australian politics. It also highlighted major differences in opinion on health policy in Australia, in particular over the respective roles and obligations of the state, and the responsibilities of individuals. Many of these differences remain to this day.

HEALTH AND WELFARE BEFORE AND AFTER FEDERATION

Australia's health care system on the eve of the Second World War remained deeply rooted in the nation's 19th-century colonial origins. Public hospitals remained places of last resort for the urban poor right up until the late 19th century. Most were funded by charities or run by religious orders, or in the impecunious smaller colonies, by the state. Demand for hospital services in the first half of the 20th century grew as safety improved and surgical procedures became more effective. Along with this came a gradual increase in state government funding for, and control of, public hospitals. While private hospitals survived, the heart of the health system turned towards the public hospital. They became the centre of expanded medical education, and the middle classes began to demand that they, too, should share in the benefits provided by public hospitals.

Australian governments, regardless of their political persuasion, had always been reluctant to directly fund welfare services. Some of this reluctance came from the revulsion felt by recent British immigrants towards the indignities of the Poor Law and its charity hospitals. In contrast, the Australian welfare state, as it developed in the late 19th century, relied heavily on the notion of individual self-reliance, especially through the wage system. The premise was that adequate wages, supported by state intervention in the economy through arbitration and protection, should be enough to ensure the welfare of a family. As a result, direct state support was limited to those who, through no fault of their own, were unable to participate fully in the wage system: invalids, the aged, widows and women, for example. Others were thrown onto the charity of private philanthropy, which remained moralistic, 'fragmented and disorganised'.

While state-owned and operated hospitals were becoming the main provider of hospital care, most patient encounters continued to be with the general medical practitioner (GP). At the time, GPs with practices in working-class areas derived most of their income from annual fixed capitation ('per head') fees, or 'lodge payments'. They were paid by friendly societies at a set amount for each member registered with the GP. The GP would provide a limited range of services to members, with no further charge. GPs would supplement this basic income by charging a fee for additional services, including childbirth, which were not covered by the annual fee. Many GPs had separate, superior waiting rooms for their private patients.

Lodge practice was deeply disliked by the medical profession, partly because of endless battles with the friendly societies over payment scales and a widespread view that low fees drove them to offer inferior treatment. The stigma that surrounded lodge practice helped shape the deep hostility of doctors towards any type of capitation payment.

While the shape of hospital and medical practice was developing in Australia in the early 20th century, there was an important voice in the background advocating for a radically different approach to health care. The national hygiene movement (alternatively known as the social medicine movement) emerged and gained much of its strength from medical officers who had returned from the First World War. They were fired up with the possibilities of purposive public action on health, especially preventive health. These apostles of the creed of public health worked mainly from state health departments, and were committed to the principles of social medicine; their conviction only intensified through the Depression years. They asserted that health was not just a matter of curative treatment but depended heavily on broader environmental conditions – at the time, the issues were clearing slums, establishing infant health centres and preschools, and ensuring safer workplaces. The strongest proponents of these views were the progressives who staffed the new Commonwealth Department of Health, led for its first quarter century by John Howard Lidgett Cumpston. Cumpston started with an ambitious plan to centralise leadership in public health in the new Commonwealth department, subordinating all elements of the health system, curative as well as preventive, to the demands of the new public health agenda.

The Commonwealth Department of Health occupied an important but ambiguous place in the Australian health system in the early part of the 20th century. The Australian nation came together rather unwillingly in 1901 by granting the new federal government a limited list of powers – the minimum that a colonial politician of the 1890s imagined was necessary to establish a weak but functioning national government. The federal government's health powers were largely limited to quarantine, but even that was resisted by the states until the Spanish influenza epidemic of 1919 showed that infectious disease was no respecter of states' rights and boundaries.

Outside quarantine, the Commonwealth Health Department's powers were not based on a constitutional mandate, but relied on pragmatic increments of authority, gained by providing information and practical advice to state departments or services where no one else cared to venture. The department's strongest areas of influence were in those spheres that were of little interest to their colleagues in the states – the settlement of the tropics, the development of improved industrial health and maternal and child services as well as services in the Commonwealth-controlled Northern Territory, especially the health of Aborigines. This growth in power came to an abrupt halt in 1931 when the Department of Health barely survived the massive cuts to government expenditure during the Depression years. It retreated into its established quarantine power and was completely excluded from the emerging debate over national health insurance, driven by the Treasury.

While uniting the country, federalism fragmented health services. It is unlikely that the individualistic, far-flung Australian colonies would ever have come together except under the guarantees of autonomy of federalism. Unsurprisingly then, each state system went its own way on health, with distance and the various funding systems already in operation creating quite different hospital systems. Queensland's state- and Catholic-run public hospitals, for example, became increasingly dependent on the Golden Casket lottery for funding. South Australia refused all contamination of the health system with the abomination of state-sponsored gambling, and relied instead on the diminishing pool of public charity and taxation revenues.

The upside of federalism, and the variation between state health systems, was that it enabled considerable experimentation at the state level. Queensland, for example, pioneered improvements in hospital funding and the organisation of specialist services, breaking from the old honorary system by 1938. Tasmania, faced with intractable workforce shortages, experimented with novel rural and remote nursing services.

Despite their differences, all states became increasingly reliant on the growing number of fee-paying patients admitted to public hospitals. While public wards remained free, accessible to those who fell below a rigorous means-test, 'intermediate wards' gave fee-paying patients better conditions and a choice of doctor. Surgeons and physicians acting in an honorary capacity provided treatment to patients on public wards for free. In exchange, they were able to admit their private patients to the intermediate wards.

The health system that emerged after federation was also deeply fragmented between the cottage industry of general practice – largely regulated by professional organisations, with little direct role for state government and even less for the federal one – and the modern, integrated health factory of the urban general hospital that was emerging in each of the capital cities. The medical profession, from the loftiest Macquarie Street specialist to the struggling lodge doctor, remained overwhelmingly in private practice and deeply opposed to the slow inroads of salaried practice.

FROM NATIONAL INSURANCE TO SOCIAL SECURITY

The national insurance scheme proposed in 1938 claimed to solve some of the major dilemmas in health care at the time. Because insurance would be compulsory, the scheme would widen access to health care and draw more contributors into the risk pool. It would also increase medical incomes and provide a more reliable source of funding. However, to be actuarially sound, the scheme needed to be tied to capitation – fee-for-service was far too unpredictable and open-ended for a scheme designed to be self-funding. This limitation, along with the heated opposition of unions and organised medicine, meant there was little public sympathy for Menzies' principled stance on national insurance. The incident was soon overshadowed by Lyons' sudden death, in April 1939, which many of his supporters blamed on Menzies' disloyalty.

Before he died, Lyons had argued that the financial demands of approaching war justified the suspension of national health insurance. When hostilities broke out in September 1939, Menzies had become Prime Minister, but he led a shaky and divided government. The September 1940 election left his government in minority, dependent on the goodwill of two independents. National insurance appeared to be dead. However, it was not long until governments began to prioritise social policy once again. Before the Pacific War broke out in December 1941, domestic support for the sacrifices made necessary by the war effort remained weak. Menzies saw social policy, promising a better world after the war, as an antidote to low civilian morale and his government introduced child endowment payments. Commencing the planning for a more thoroughgoing national health scheme was another part of a promise that, unlike the First World War, Australians would return to a better society.

(Continues...)

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Excerpted from Making Medicare by Anne-marie Boxall, James A. Gillespie. Copyright © 2013 Anne-marie Boxall and James A. Gillespie. Excerpted by permission of University of New South Wales Press Ltd.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Contents

Foreword Professor Stephen Leeder,
Making Medicare: a timeline,
Introduction: Health care and history,
1 Health reform efforts to the 1950s,
2 Whitlam and health system reform, 1960–74,
3 Making Medibank a reality, 1974–75,
4 Organised medicine versus Medibank,
5 Fraser's health system reforms, 1976–81,
6 Medibank weighed in the balance, 1976–78,
7 Why Fraser abolished Medibank,
8 Hawke brings Medicare into being,
9 The politics of Medicare, 1984–96,
10 John Howard, Medicare's greatest friend?,
11 Current issues, future challenges,
Notes,
References,
Acknowledgments,
Index,